Handling bad accounts

Business
1

I work for an design company. I get on really well with the main designers and have worked for them for years. I’ve had lots of work from them—and I’d like to think in return they’ve really benefitted from my expertise and reliability in return.

We always had the agreement that whatever work was done at the end of the month I invoiced for. I put 30 days on; they usually paid a couple of weeks late but I was fine with that since they were consistent. And I recognised they often needed to get it from their clients first.

Anyway, due to a recent staffing change someone different handles accounts now. I’ve had to wait a month or so longer for invoices to be paid and now the new guy is saying he will not pay for a job until it is 100% finished. So if you image that I did the majority of a job in a given month but we don’t get final amends until 3 months later and then it is a couple of months to go through invoice and payment I could be waiting 5–6 months between doing the work and getting payment.

Clearly, this is not on but the guy just doesn’t get it—and doesn’t know to treat sub-contracters.

I like to be up front and clear, especially where money is concerned, and when this staffing change happened I reiterated the working arrangement and said, let me know if you have any problems with this.

I also have a running contract (which applies to all work I do for them) that states I have the right to change by the hour for the amount of work done at any given time. This is to prevent the above happening: I wait ages to get the chance to invoice.

I know I am in the right. However, this company represents a significant proportion of my income and the work is really enjoyable. I don’t want to sour the relationship but at the same time, I feel like I’m being unfairly treated.

What would you do?

I think I may have to politely reiterate the payment terms and maybe offer them for each job they can either do it as we have always done it or I get a 50% payment early on and 50% on completion.

(By the way, I have since found out the guy who I formerly dealt with for payments has left so I can’t go to him.)

2

I think that being firm but insistent is the best strategy. I have clients that will push the envelope of what is reasonable. I think they do “get it” but in times of tight cash across the board, they will try to delay everyone’s payment. The ones who complain most loudly will get paid and the ones who quietly accept the delay will not.

3

I would just hold firm for a 30-day term. That is standard. If they are late sometimes, that’s ok, but you shoudn’t have to wait to see if they get paid or not - they is their risk to bear not yours.

4

Do you mean that you get paid 30 after the invoice, or 30 days after the due date (in other words, 60 days after the invoice)?

If the former, I don’t think you can expect anything better. Most firms work on a monthly accounting cycle, and 30 days to close the sales ledger is fairly normal.

But if the invoices are being paid 30 days late, that’s another matter.

You say you have a good relationship with the people on the design side. Why don’t you have a friendly chat with them. Explain the situation, and ask them to sort it out with the accounts people. If necessary, establish a new contract with them that clearly states your payment terms (when I say a contract, this doesn’t have to be a legal document drawn up by a lawyer; it should be enough to write to the client stating your payment terms, and getting them to write back to accept them).

You might also consider stating that you will charge interest on overdue accounts (although, personally, I would never do that).

The point is that whatever terms you want to apply must be agreed in advance by both sides. You need to make your terms clear, and get the client’s agreement before you go any further.

Mike